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Thursday, June 22, 2006

Schneider Responds To IG Complaint

Hoosier Lottery Director Esther Schneider met with various members of the media today, including the AP's Mike Smith, to answer charges laid out in a detailed, unsigned complaint which was originally filed with the Inspector General's office on June 12. While Schneider denied some of the more serious charges in the complaint, she surpisingly owned up to many of the complaint's charges against her. And Schneider told Smith that she welcomed an investigation by the IG's office. Oddly, IG David Thomas would not confirm whether an investigation of Schneider was under way. Smith writes:

The Hoosier Lottery director says she would welcome an investigation into allegations of wrongdoing and mismanagement against her.

Esther Schneider said she did not know the source of the allegations, which were sent in letters to both the Republican and Democratic parties. Jeff Harris, a spokesman for Senate Democrats, said their members received the anonymous complaint in letters that had no return address and were distributed through the Statehouse mail system . . .

But she said the allegations contained in a 10-page complaint, such as rewarding contracts to benefit friends and having assistants perform personal tasks for her, were either twisted, half-truths or baseless and likely stemmed from disgruntled workers or former lottery employees.

The cover page of the complaint said it was sent to the state inspector general's office on June 12, and a log in that office dated June 16 shows that a complaint was filed against an employee of the lottery. But Inspector General David Thomas said he could not confirm whether it was the same anonymous complaint sent to lawmakers, or whether there was any investigation into the one his office received.

Schneider said she also did not know whether it was the same complaint, but guessed that it was. Regardless, "If something has been filed they have an obligation to do an inspection." She said she welcomed an investigation by Thomas' office so she could be cleared.

Here's what Schnieder told Smith was truthful about the complaint against her:

Making a decision to pay claims for winning Hoosier Millionaire tickets beyond the expiration date for cashing in. Smith writes: "An internal auditor said in a memo earlier this year that doing so violated a lottery statute, but Schneider and the auditor said she did it for promotional reasons and was unaware that an extension was not allowed."

Sponsoring a luncheon for a women's leadership program named for Republican Sen. Richard Lugar and holding a drawing for scratch-off tickets there to gather names of people to whom the lottery could send promotional materials. Smith writes: "She said Republican Gov. Mitch Daniels, who appointed her last year, told her later that was wrong because it appeared as if the lottery was sponsoring a political event."

Bringing her dogs to work and having Lottery employees tend to them, Smith writes: "Schneider said she did bring her two dogs to her office one day because she needed to drive them to the vet after work. But she said a commission meeting was being held, and "I had two employees who begged me to please could they hold the dogs, could they walk the dogs."

Awarding contracts to friends and former business associates, Smith writes: "A recent internal audit looked into a few specific concerns raised by an employee or the agency's chief financial officer, including her awarding a $90,000 no-bid contract for marketing research to a company owned by a friend she knew in the gaming industry. Schneider said it was the only vendor who could do the job, and the audit said the choice was approved by the governor's office and Lottery Commission and there appeared to be no violation of state law or administrative codes.

Engaging in political work on state time, Smith writes: "She acknowledged speaking to some Republican groups about the lottery's operations, but said it was always done on personal time or during vacation."

Mistreating Lottery employees, Smith writes: "Schneider acknowledged that she sometimes gets excited when talking to employees, and that Lottery Commission Chairwoman Jean Northenor had talked to her about her management style with people. But Northenor said she had never reprimanded Schneider, as the anonymous complaint alleged."

Firing people because of their political affilliation, Smith writes: "She said since she took over operations of the lottery, she has dismissed about 50 employees for various reasons and has looked scrupulously for cost-savings, and some employees or former workers did not like her management style. "They are definitely gunning for me," she said.

I am actually quite impressed with Schneider's candor in her interview with Smith, particularly when I compare it to the summary of the complaint I wrote about last night. You have to give Schneider credit for owning up to her mistakes when called upon to answer for them, quite the opposite of the deny, deny and deny approach taken by former ICJI Director Heather Bolejack. At the same time, they do raise some very serious questions about her management of the Lottery, an extremely critical source of state revenues. Her own admission of partisan political activities is particuarly troublesome. While she denies any political considerations in hiring/firing decisions, the fact that she has canned at least 50 employees of an agency that is not all that large to begin with is quite troubling. It is imperative that whoever serves in this position remain completely independent of any partisan considerations, and it certainly appears she has crossed that line on several occasions with the full knowledge of the Governor's office.

Schneider, prior to taking the job as Lottery director, was described by some who know her as very principled and moral in her approach to her work. It has been said that Brad Hiller, the former consultant for the Senate Majority Campaign Committee who was caught embezzling more than a hundred thousand dollars, would have never been prosecuted had she not demanded it of Senate President Pro Tem Robert Garton and other Senate GOP leaders when she worked for them. According to sources, she threatened to go public and tell the prosecutor if Garton didn't agree to do so. In the end, Garton and the GOP leadership agreed to cooperate in the investigation of Hiller, which eventually led to a conviction and several months time in prison for Hiller. While she obviously did the right thing with respect to Hiller, that is now the standard to which people are now going to hold her.

Unlike the case of Bolejack, it is quite apparent from Schneider's admissions to Smith that the Governor's office has been well aware of at least some of the problems laid out in the complaint for quite some time. This will no doubt open the Governor up to new charges that he is not taking the ethics he preached when he first took office as seriously as the public might expect him to. It also raises questions about why the Inspector General wasn't called upon to investigate the agency sooner rather than have it become public in the unconventional way it first reached the blogosphere and then the mainstream media with still no official word from the administration itself.

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